Reader needs to find out about equity release for her house. Photograph: Alamy

Q I am a pensioner aged 70, and including pension credit, my pension is £100 a week. I have a £750 overdraft which is just about maxed out. However, I own my own house, and there is no mortgage to pay. I have been thinking of equity release and keep receiving brochures about it.

I don't really understand the ramifications of equity release. I don't have children or anyone close to leave the property to – although I do have four godchildren who will get something when I die. I would love to travel and be able to do enjoyable things. AS

AEquity release is a way of cashing in some of the value of your home while still having the right to live there. There are two main types of equity release schemes: the lifetime mortgage and the home reversion scheme.

With an equity release lifetime mortgage, you raise cash by taking out a mortgage on your home which lasts until you die and/or your home is sold. Interest is charged on the mortgage but you don't pay it during your lifetime. Unlike a normal mortgage, rather than paying the interest after taking out the loan, the interest charged is rolled up and added to the money borrowed and repaid when the property is sold on your death. The major downside of this is that the interest bill can add a significant amount to the size of the original amount borrowed, not least because interest is charged on the loan plus rolled up interest. The consumer group Which? found that after 10 years of taking out a lifetime mortgage of £40,000 with an average fixed-interest rate of 6.9%, the amount owed would have more than doubled to just over £80,000. So the ramifications for the beneficiaries of your will are that a significant part of the proceeds from selling your home after your death will go towards paying off the equity release mortgage plus accumulated interest.

You can reduce the amount of money that'll be needed to pay off the mortgage on your death by going for a drawdown loan where, instead of taking a large lump sum at the start of the loan, you borrow smaller amounts either as you need the cash or on a regular basis. Because you are taking smaller amounts over time, the debt will grow more slowly and the interest charged will be less. Taking only small sums could also mean that you would be less likely to lose your pension credit and any other means-tested benefits which could very well happen if you raised a large lump sum.

With a home reversion scheme, instead of borrowing against your home, you sell a proportion of it to a reversion company which, when you die and the property is sold, gets that proportion of the sale proceeds. So if, for example, you sold 50% of your home, the reversion company would get 50% of the money from the sale. The big downside with a home reversion scheme is that, although no interest is charged on them, it is expensive because the price the reversion company pays for its share is a lot less than its market value. For example, you could sell a 50% share of your home but receive the equivalent of just 15% of the value of your home in cash. If you were to go down the home reversion route, you would know how much of the proceeds of selling your home after your death would go to your heirs. That is, if you sold a 50% share, you would leave them the 50% of the house that you didn't sell.

The much cheaper alternative to both types of equity release scheme would be to raise cash by moving to a cheaper home. If this isn't an option and you think you would like to investigate equity release further, make sure you get advice from an adviser who holds an equity release qualification. More information is available from the Money Advice Service.